Retail Inventory Management: Why Stores End Up Overstocked and Out of Stock

Why a healthy stock total hides an unhealthy mix

Core is Merchmix’s merchandise planning workspace; Core Plus handles allocation, replenishment and transfers. Together, they help planners connect what the business expects to sell with the stock it holds and the stock it sends to stores.

Consider the apparel range in the animation: 12 Everyday Knits, 80 Cotton Shirts and 20 Straight Denim units. That is 112 units in total. At an assumed demand of two knits a day, the knit has six days of stock. At one shirt a day, the shirt has 80 days. A healthy-looking total hides a shortage risk and excess exposure.

The cause is not simply too little inventory. The quantities no longer match the selling rate of each variant. Repeating a style-wide top-up would add to the slower lines while leaving the planner’s real question unanswered: which product needs stock, and when?

Five reasons retailers overstock some products and run out of others

Planning from sales without checking availability. A size that was unavailable records few sales. Copying that figure into the next buy treats a supply gap as weak demand. In Core, compare the demand assumption with stock and intake before repeating the previous quantity.

Allocating the same quantities to different stores. Equal allocations do not account for different local selling rates. Core Plus lets the team inspect sales, stock and cover at store level before distributing incoming stock.

Ignoring the size mix. A style total hides which sizes remain. The missing knit size does not become available because another size is overstocked. Check the variant and size strategy before increasing the whole style.

Ordering again without checking incoming supply. An open order might already cover the need, or its expected arrival might be too late. The inventory variant’s On Order tab gives the planner a separate place to inspect that commitment.

Keeping the old intake plan after demand changes. When sales slow but purchasing continues at the previous rate, stock accumulates. Core’s weekly planning view connects the revised sales expectation with stock, intake and buying capacity.

Start with the overview, then open the variant

The Inventory Overview in Merchmix brings stock, purchases, replenishment and sales into one place. Use the summary to find the next question, then open Replenishment for the relevant variants. The table shows the stock position beside replenishment quantities and days of stock.

In the example, the knit has 12 units and a 44-unit replenishment proposal. The shirt holds 80 units with no proposed replenishment. Those are different decisions: investigate the knit’s timing, and challenge further buying of the slow-moving shirt.

Open the knit’s detail to see Replenishment & Forecast, Forecast Settings and On Order. These views answer different questions: how stock is expected to run down, which forecasting basis is shown, and what supply is already committed.

Use the forecast to find the gap before supply arrives

Days of stock is a simple starting point: stock on hand divided by average daily unit demand. The knit has 12 units divided by two a day, giving six days. Its assumed supply lead time is ten days. That leaves a four-day gap if demand stays constant and no other stock arrives.

The animation makes that gap visible. The dark line reaches zero on day six. The alternative line assumes a 44-unit arrival on day ten. Adding stock later improves the position after arrival; it does not serve the customers who needed it earlier.

Use the forecast as an assumption to test. Check whether recent sales reflect a promotion, a seasonal change or an availability problem. Do not turn one unusually strong week into a permanent buying rate.

Choose the response that fits the cause

For the knit, check confirmed incoming supply first. The On Order view is empty, so the 44 units remain a proposal rather than stock already due. Next, establish whether suitable stock is available elsewhere and whether it can reach the destination before the gap.

Core Plus provides the allocation and transfer workflows for that distribution question. If another location can supply the knit, check what remains there before progressing the movement. A new supplier order is a separate option, and its lead time still has to fit the need.

For the shirt, another refill is not the starting point. At the assumed rate, 80 units represent 80 days of stock. Check the remaining selling window and existing commitments. If the exposure no longer fits the plan, change the intake assumption in Core and consider the appropriate stock or pricing response.

Connect the stock decision with MFP/WSSI

Core’s MFP/WSSI workspace connects sales and margin targets with budgets, stock and intake. Its budgets and scenarios give the planning assumptions a working record.

Use the weekly position in MFP/WSSI to see whether intake arrives in time and how much stock remains after expected sales. The financial and stock implications belong in the same planning discussion.

Open to buy (OTB) is the buying allowance available under the current plan. Check it alongside existing orders before adding another commitment. The knit’s urgent stock need and the shirt’s excess both belong in that financial discussion; one does not cancel out the other.

Give Yukti a specific stock problem to help solve

Yukti is the assistant inside Merchmix. It helps investigate stock problems and prepares supported actions for a person to approve. The available actions depend on the connected tools and the user’s permissions.

For this example, ask why the knit is expected to run out before supply can arrive. Check the evidence behind the answer: current stock, the demand assumption, lead time and open orders. If a supported action is proposed, confirm the product, quantity and destination before approving it.

Use the answer to decide the next step, then follow the relevant planning or operational record. A clear explanation is useful, but the knit still needs a timely supply decision and the shirt still needs an intake decision.

Leave the stock meeting with a decision about each exception

For the knit, establish how to cover the four-day timing gap and who will progress the chosen action. Keep the 44-unit proposal separate from an issued order. If a movement is approved, follow its current status before counting the stock as available.

For the shirt, decide whether further intake still fits the selling window. Carry any changed assumption into Core rather than leave the next buy based on the old demand rate.

Retail inventory management improves when the team explains the imbalance before adding stock. Use Merchmix to connect the variant evidence, store distribution and financial plan, then assign a concrete next step to the product that needs it.